Solid World has taken an innovative step towards financializing carbon credits on the blockchain with the launch of the first forward carbon assets pool using automated market maker Polygon, as announced in a recent press release. This move has the potential to transform the way carbon credit projects are financed, as the liquidity pool would allow projects to essentially pre-sell future carbon credits at a price determined by an automated market maker, according to Solid World CEO, Stenver Jerkku.
In recent months, there has been a surge in the number of blockchain startups, like Solid World, aiming to provide financial and technical tools to mitigate climate change impacts. Entrepreneurs are hopeful that blockchain technology can introduce transparency and increase funding for climate-positive projects.
Solid World’s liquidity pool will specifically focus on mangrove restoration carbon projects, which involve developing ecosystems of small trees and shrubs in coastal brackish waters. Mangroves are capable of storing up to four times as much carbon as other tropical forests and play a key role in protecting coastlines from storms and rising sea levels, according to the World Wildlife Fund (WWF).
Liquidity pools in crypto markets share similarities with market makers in traditional finance, as both facilitate the buying and selling of assets by pooling users’ funds. Forward contracts, often used in hedging strategies, specify the purchase or sale of an asset at a future date based on specific parameters like price. In the case of Solid World, the forward contracts offer a degree of certainty to long-term carbon credit projects.
The implementation of the liquidity pool is expected to provide crucial funding for mangrove restoration projects, while simultaneously offering structured inventory for distributors seeking to sell high-quality carbon credits. Furthermore, the Solid World pool will employ a risk framework powered by artificial intelligence to score carbon credits. Factors such as climate, legal, political, and economic risks will be taken into account when assessing the risks associated with financing carbon projects.
While the emergence of blockchain startups striving to address climate change is laudable, it is essential to remain cautious about the potential drawbacks, such as the energy consumption associated with blockchain technology. Nevertheless, the forward-thinking approach taken by Solid World and similar companies could deliver promising results in enhancing the funding and transparency of carbon credit projects, ultimately contributing
Source: Coindesk
